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                                                                    EXHIBIT 10.3

                          REGISTRATION RIGHTS AGREEMENT


         THIS REGISTRATION RIGHTS AGREEMENT, dated as of June 1, 1999 (this
"Agreement"), is made by and among Innovative Gaming Corporation of America, a
Minnesota corporation (the "Company"), and the person named on the signature
page hereto (the "Initial Investor").

                                   WITNESSETH:

                   WHEREAS, in connection with the Subscription Agreement, dated
         as of June 1, 1999, between the Initial Investor and the Company (the
         "Subscription Agreement"), the Company has agreed, upon the terms and
         subject to the conditions of the Subscription Agreement, to issue and
         sell to the Initial Investor shares of Series C Convertible Preferred
         Stock (such shares, including any additional shares of Series C
         Convertible Preferred Stock issued as dividends on such shares, are
         referred to as the "Shares"), convertible into shares of Common Stock,
         $.01 par value (the "Common Stock"); and

                   WHEREAS, to induce the Initial Investor to execute and
         deliver the Subscription Agreement, the Company has agreed to provide
         certain registration rights under the Securities Act of 1933, as
         amended, and the rules and regulations thereunder, or any similar
         successor statute (collectively, the "Securities Act"), with respect to
         the Shares;

                   NOW, THEREFORE, in consideration of the premises and the
         mutual covenants contained herein and other good and valuable
         consideration, the receipt and sufficiency of which are hereby
         acknowledged, the Company and the Initial Investor hereby agree as
         follows:

         1.        DEFINITIONS.

                   (a)   As used in this Agreement, the following terms shall
         have the following meanings:

                         (i)   "Certificate of Designation" means the
         Certificate of Designation of Series C Convertible Preferred Stock as
         filed with the Minnesota Secretary of State and as amended from time to
         time.

                         (ii)  "Investor" means the Initial Investor and any
         transferee or assignee who agrees to become bound by the provisions of
         this Agreement in accordance with Section 9 hereof.







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                   (iii)   "register," "registered," and "registration" refer to
         a registration effected by preparing and filing a Registration
         Statement or Statements in compliance with the Securities Act on such
         appropriate registration form promulgated by the Commission as shall be
         selected by the Company and the declaration or ordering of
         effectiveness of such Registration Statement by the United States
         Securities and Exchange Commission ("SEC").

                        (iv)    "Registrable Securities" means the Common Stock
         issuable upon conversion of the Shares.

                        (v)     "Registration Statement" means a registration
         statement under the Securities Act registering securities of the
         Company.

                (b)     Capitalized terms used herein and not otherwise
         defined herein shall have the respective meanings set forth in the
         Subscription Agreement.

         2.     REGISTRATION.

                (A)     REGISTRATION. The Company shall prepare and file
         a shelf- Registration Statement covering the sale by the Investor of
         Registrable Securities (the "Registration Statement") with the SEC
         pursuant to Rule 415 of the Securities Act within thirty (30) business
         days after the closing of the purchase of the Shares pursuant to the
         Subscription Agreement (the "Closing"). As part of such Registration
         Statement, with the approval of the Investor (with such approval being
         given hereby for the registration of up to 422,500 shares issued upon
         exercise of certain Warrants issued to the parties indicated in Annex
         A), the Company may include additional shares of Common Stock
         registered on behalf of the Company or the holders of such additional
         shares. In light of the fact that the number of shares of Common Stock
         into which the Shares are convertible is variable, the Company shall
         include in the Registration Statement a number of Registrable
         Securities equal to not less than 1,331,500 shares. If at any time the
         number of Registrable Securities included in the Registration Statement
         is insufficient to enable the Investor to sell all Registrable
         Securities, the Company shall promptly, but no later than ten (10)
         business days thereafter, file an additional registration statement to
         register for resale such additional Registrable Securities as may be
         required.

                (B)     PIGGYBACK OBLIGATIONS. 1. If the Company proposes
         to register any of its warrants, Common Stock or any other shares of
         common stock of the Company under the Securities Act (other than a
         registration (A) on Form S-8 or S-4 or any successor or similar forms,
         (B) relating to Common Shares or any other shares of common stock of
         the Company issuable upon exercise of employee share options or in
         connection with any employee benefit or similar




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         plan of the Company or (C) in connection with a direct or indirect
         acquisition by the Company of another Person or any transaction with
         respect to which Rule 145 (or any successor provision) under the
         Securities Act applies), whether or not for sale for its own account,
         it will each such time, give prompt written notice at least twenty (20)
         days prior to the anticipated filing date of the registration statement
         relating to such registration to the Initial Investor, which notice
         shall set forth such Initial Investor' rights under this Section 2(b)
         and shall offer the Initial investor the opportunity to include in such
         registration statement such number of Registrable Securities as the
         Initial Investor may request. Upon the written request of an Initial
         Investor made within ten (10) days after the receipt of notice from the
         Company (which request shall specify the number of Registrable
         Securities intended to be disposed of by such Initial Investor), the
         Company will use its best efforts to effect the registration under the
         Securities Laws of all Registrable Securities that the Company has been
         so requested to register by the Initial Investor, to the extent
         requisite to permit the disposition of the Registrable Securities so to
         be registered; provided, however, that (A) if such registration
         involves a public offering, the Initial investor must sell its
         Registrable Securities to the underwriters on the same terms and
         conditions as apply to the Company and (B) if, at any time after giving
         written notice of its intention to register any Registrable Securities
         pursuant to this Section 2 and prior to the effective date of the
         registration statement filed in connection with such registration, the
         Company shall determine for any reason not to register such Registrable
         Securities, the Company shall give written notice to the Initial
         Investor and, thereupon, shall be relieved of its obligation to
         register any Registrable Securities in connection with such
         registration. The Company's obligations under this Section 2(b) shall
         terminate on the date that the registration statement to be filed in
         accordance with Section 2(a) is declared effective by the Commission.

                   2.    If a registration pursuant to this Section 2(b)
         involves a public offering and the managing underwriter thereof advises
         the Company that, in its view, the number of shares of Common Stock,
         Warrants or other shares of Common Stock that the Company and the
         Initial Investor and all other prospective sellers holding registration
         rights intend to include in such registration exceeds the largest
         number of shares of Common Stock (including any other shares of Common
         Stock of the Company) that can be sold without having an adverse effect
         on such public offering (the "Maximum Offering Size"), the Company will
         include in such registration, only that number of shares of Common
         Stock, such that the number of securities registered does not exceed
         the Maximum Offering Size, with the difference between the number of
         shares in the Maximum Offering Size and the number of shares to be
         issued by the Company to be allocated (after including all shares to be
         issued and sold by the Company) among the Initial Investor and such
         other prospective holders pro rata on the basis




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         of the relative number of securities offered for sale under such
         registration by each of the initial Investor and such other prospective
         holders.

                   If as a result of the proration provisions of this Section
         2(b)(ii), any Initial Investor is not entitled to include all such
         Registrable Securities in such registration, such Initial Investor may
         elect to withdraw its request to include any Registrable Securities in
         such registration. With respect to registrations pursuant to this
         Section 2(b), the number of securities required to satisfy any
         underwriters' over-allotment option shall be allocated pro rata among
         the Company and the Initial Investor on the basis of the relative
         number of securities otherwise to be included by each of them in the
         registration with respect to which such over-allotment option relates.

                   (C)   PAYMENTS BY THE COMPANY. The Company will use its best
         efforts to have the Registration Statement become effective with the
         SEC no later than 90 days from the closing of the purchase of the
         Preferred Shares (the "Closing"). If the Registration Statement
         covering the Registrable Securities is not effective within 120 days
         after the closing, then the Company will make payments to each holder
         of Registrable Securities (each, a "Holder") in such amounts and at
         such times as shall be determined pursuant to this Section 2(b). The
         amount to be paid by the Company to the Holders shall be determined as
         of each Computation Date, and such amount shall be equal to (1) in the
         case of the first Computation Date, one percent (1%) and (2) in the
         case of each other Computation Date, two percent (2%), in each case of
         the aggregate subscription price paid by the Investor for the Shares
         pursuant to the Subscription Agreement (the "Periodic Amount");
         provided, however, that if any Computation Date is less than 30 days
         subsequent to another Computation Date, then the Periodic Amount
         payable on the later Computation Date shall be prorated. The Periodic
         Amount shall be divided among all the Holders in the same proportion as
         each Holder's Registrable Securities bears to the total of the
         outstanding Registrable Securities (assuming, for purposes of such
         computation, that all Shares have been converted into Common Stock).
         The Periodic Amount shall be paid by the Company within ten business
         days after each Computation Date and shall be payable in cash;
         provided, however, that the Company may elect in lieu of payment of any
         Periodic Amount in cash to deliver to the Investor shares of Common
         Stock having an Aggregate Market Value equal to the amount of the
         Periodic Amount if, but only if, (1) such shares are freely tradable by
         the Investor without any restriction under the Securities Act or any
         state securities or "blue sky" law and (2) after the issuance of such
         shares to Holder, the aggregate number of shares of Common Stock
         beneficially owned by the Holder (determined in accordance with Section
         13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
         Act")) would not exceed 4.9% of the outstanding shares of Common Stock.




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                   As used in this Section 2(b), the following terms shall have
         the following meanings:

                   "Aggregate Market Value" of any shares of Common Stock as of
         any Computation Date means the product obtained by multiplying (a) such
         number of shares of Common Stock times (b) the Average Market Price of
         the Common Stock for the Measurement Period for such Computation Date.

                   "Average Market Price" of any security for any period shall
         be computed as the average closing price of the shares over the
         Measurement Period.

                   "Computation Date" means the date which is 120 days after the
         Closing and each 30 days thereafter for the purposes of this Section
         2(b).

                   "Measurement Period" means the period of ten consecutive
         trading days for the Common Stock ending on (or on the last trading day
         preceding) each Computation Date.

              3.   OBLIGATIONS OF THE COMPANY. In connection with the
         registration of the Registrable Securities, the Company shall:

                   (a)   prepare promptly and file with the SEC promptly (but in
         no event later than 30 business days) after the Closing, a Registration
         Statement or Statements with respect to all Registrable Securities
         pursuant to Rule 415 under the Securities Act, and thereafter use its
         best efforts to cause the Registration Statement to become effective
         within 90 days after Closing. In the event the Registration Statement
         is not effective within 180 days after the Closing, the Investor shall
         have the right to require the Company to redeem all Registrable
         Securities as provided in the Subscription Agreement. The Company shall
         keep the Registration Statement effective pursuant to Rule 415 at all
         times until the earlier of (1) the Registrable Securities have been
         disposed thereunder or (2) two years from the date of Closing (or the
         aggregate period of two years of effectiveness in the event that the
         effectiveness of such Registration Statement is temporarily suspended
         (which may not exceed 60 days in any twelve (12) month period) (the
         "Registration Period"). In any case, the Registration Statement
         (including any amendments or supplements thereto and prospectuses
         contained therein) filed by the Company shall not contain any untrue
         statement of a material fact or omit to state a material fact required
         to be stated therein, or necessary to make the statements therein, (in
         case of a prospect in light of the circumstances in which they were
         made), not misleading; provided, however, that if at any time the
         Investors shall be entitled to sell all Registrable Securities held by
         them pursuant to Rule 144 promulgated under the Securities Act or any
         other similar rule or regulation of the SEC that may at any time permit
         the Investors to sell securities




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         of the Company to the public without registration, without volume or
         other restrictions, and without imposing restrictions arising under the
         federal securities laws on the purchases thereof in a period of three
         consecutive months, then the Company shall, so long as it meets the
         current public information requirements of Rule 144, thereafter no
         longer be required to maintain the registration of Registrable
         Securities pursuant to this Agreement;

                   (b)  prepare and file with the SEC such amendments
         (including post-effective amendments) and supplements to the
         Registration Statement and the prospectus used in connection with the
         Registration Statement as may be necessary to keep the Registration
         Statement effective at all times through the Registration Period, and,
         during such period, comply with the provisions of the Securities Act
         with respect to the disposition of all Registrable Securities of the
         Company covered by the Registration Statement until such time as all of
         such Registrable Securities have been disposed of in accordance with
         the intended methods of disposition by the seller or sellers thereof as
         set forth in the Registration Statement or prospectus supplement;

                   (c)  (i) Prior to the filing with the commission of any
         Registration Statement (including any amendments thereto) and the
         distribution or delivery of any Prospectus (including any supplements
         thereto), provide (A) draft copies thereof to the Investors and reflect
         in such documents all such comments as the Investors (and their
         counsel) reasonably may propose and (B) to the Investors a copy of the
         accountant's consent letter to be included in the filing and (ii)
         furnish to each Investor whose Registrable Securities are included in
         the Registration Statement and its legal counsel identified to the
         Company, (A) promptly after the same is prepared and publicly
         distributed, filed with the SEC, or received by the Company, one copy
         of the Registration Statement, each Prospectus, and each amendment or
         supplement thereto, and (E) such number of copies of the Prospectus and
         all amendments and supplements thereto and such other documents, as
         such Investor may reasonably request in order to facilitate the
         disposition of the Registrable Securities owned by such Investor;

              (d)  prepare promptly and file all necessary documents relating to
         the Registration Securities with State gaming authorities whose consent
         or approval of the Registration Statement is required.

              (e)  furnish to each Investor whose Registrable Securities are
         included in the Registration Statement, such number of copies of a
         prospectus, including a preliminary prospectus, and all amendments and
         supplements thereto and such other documents as such Investor may
         reasonably request in order to facilitate the disposition of the
         Registrable Securities owned by such Investor;




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              (f)   if necessary, use reasonable efforts to (i) register and
         qualify the Registrable Securities covered by the Registration
         Statement under such other securities or blue sky laws of such
         jurisdictions as the Investors who hold a majority in interest of the
         Registrable Securities being offered reasonably request, (ii) prepare
         and file in those jurisdictions such amendments (including
         post-effective amendments) and supplements, (iii) take such other
         actions as may be necessary to maintain such registrations and
         qualifications in effect at all times through the Registration Period
         and (iv) take all other actions reasonably necessary or advisable to
         qualify the Registrable Securities for sale in such jurisdictions;
         provided, however, that the Company shall not be required in connection
         therewith or as a condition thereto to (I) qualify to do business in
         any jurisdiction where it would not otherwise be required to qualify
         but for this Section 3(e), (II) subject itself to general taxation in
         any such jurisdiction, (III) file a general consent to service of
         process in any such jurisdiction, (IV) provide any undertakings that
         cause more than nominal expense or burden to the Company or (V) make
         any change in its charter or bylaws;

              (g)   as promptly as practicable after becoming aware of such
         event, notify each Investor who holds Registrable Securities being sold
         pursuant to such registration of the happening of any event of which
         the Company has knowledge, as a result of which the prospectus included
         in the Registration Statement, as then in effect, includes an untrue
         statement of a material fact or omits to state a material fact required
         to be stated therein or necessary to make the statements therein, in
         light of the circumstances under which they were made, not misleading,
         and use its best efforts promptly to prepare a supplement or amendment
         to the Registration Statement to correct such untrue statement or
         omission, and deliver a number of copies of such supplement or
         amendment to each Investor as such Investor may reasonably request;

              (h)   as promptly as practicable after becoming aware of such
         event, notify each Investor who holds Registrable Securities being sold
         pursuant to such registration (or, in the event of an underwritten
         offering, the managing underwriters) of the issuance by the SEC of any
         stop order or other suspension of effectiveness of the Registration
         Statement at the earliest possible time and use its best efforts to
         take all lawful action to effect the withdrawal, recession or removal
         of such stop order or other suspension;

              (i)   permit a single firm of counsel designated as selling
         stockholders' counsel by the Investors who hold a majority in interest
         of the Registrable Securities being sold pursuant to such registration
         to review the Registration Statement and all amendments and supplements
         thereto a reasonable period of time prior to their filing with the SEC,
         and shall not file any document in a form to which such counsel
         reasonably objects;




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              (j)   use its best efforts either to (i) cause all the Registrable
         Securities covered by the Registration Statement to be listed on a
         national securities exchange and on each additional national securities
         exchange on which similar securities issued by the Company are then
         listed, if any, if the listing of such Registrable Securities is then
         permitted under the rules of such exchange or (ii) secure designation
         of all the Registrable Securities covered by the Registration Statement
         as a National Association of Securities Dealers Automated Quotations
         System ("Nasdaq") "national market system security" within the meaning
         of Rule 11Aa2-1 of the SEC under the Exchange Act and the quotation of
         the Registrable Securities on the Nasdaq National Market System or, if,
         despite the Company's best efforts to satisfy the preceding clause (i)
         or (ii), the Company is unsuccessful in satisfying the preceding clause
         (i) or (ii), to secure listing on a national securities exchange or
         Nasdaq authorization and quotation for such Registrable Securities and,
         without limiting the generality of the foregoing, to arrange for at
         least two market makers to register with the National Association of
         Securities Dealers, Inc. ("NASD") as such with respect to such
         Registrable Securities;

              (k)   provide a transfer agent and registrar, which may be a
         single entity, for the Registrable Securities not later than the
         effective date of the Registration Statement;


              (l)   cooperate with the Investors who hold Registrable Securities
         being sold to facilitate the timely preparation and delivery of
         certificates (not bearing any restrictive legends) representing
         Registrable Securities to be sold pursuant to the denominations or
         amounts as the case may be, and registered in such names as the
         Investors may reasonably request and, within three (3) business days
         after a Registration Statement which includes Registrable Securities is
         declared effective by the Commission, deliver and cause legal counsel
         selected by the Company to deliver to the transfer agent for the
         Registrable Securities (with copies to the Investors whose Registrable
         Securities are included in such Registration Statement) an appropriate
         instruction and, to the extent necessary, an opinion of such counsel;
         and

              (m)   take all other reasonable actions necessary to expedite and
         facilitate disposition by the Investor of the Registrable Securities
         pursuant to the Registration Statement.

         4.   OBLIGATIONS OF THE INVESTORS. In connection with the registration
         of the Registrable Securities, the Investors shall have the following
         obligations:




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              (a)   It shall be a condition precedent to the obligations of the
         Company to take any action pursuant to this Agreement with respect to
         each Investor that such Investor shall furnish to the Company such
         information regarding itself, the Registrable Securities held by it and
         the intended method of disposition of the Registrable Securities held
         by it as shall be reasonably required to effect the registration of the
         Registrable Securities and shall execute such documents in connection
         with such registration as the Company may reasonably request. At least
         ten (10) business days prior to the first anticipated filing date of
         the Registration Statement, the Company may notify each Investor of the
         information the Company requires from each such Investor (the
         "Requested Information"). If within two (2) business days prior to the
         filing date the Company has requested and not received the Requested
         Information from an Investor (a "Non-Responsive Investor"), then the
         Company may file the Registration Statement without including
         Registrable Securities of such Non-Responsive Investor;

              (b)   Each Investor by such Investor's acceptance of the
         Registrable Securities agrees to cooperate with the Company as
         reasonably requested by the Company in connection with the preparation
         and filing of the Registration Statement hereunder;

              (c)   Each Investor agrees that, upon receipt of any notice from
         the Company of the happening of any event of the kind described in
         Section 3(f) such Investor will immediately discontinue disposition of
         Registrable Securities pursuant to the Registration Statement covering
         such Registrable Securities until such Investor's receipt of the copies
         of the supplemented or amended prospectus contemplated by Section 3(f)
         and, if so directed by the Company, such Investor shall deliver to the
         Company (at the expense of the Company) or destroy (and deliver to the
         Company a certificate of destruction) all copies in such Investor's
         possession, of the prospectus covering such Registrable Securities
         current at the time of receipt of such notice; and

         5.   EXPENSES OF REGISTRATION. All expenses (other than fees and
         expenses of investment bankers and other than brokerage commissions)
         incurred in connection with registrations, filings or qualifications
         pursuant to Section 3, including, without limitation, all registration,
         listing and qualifications fees, printers and accounting fees and the
         fees and disbursements of counsel for the Company, shall be borne by
         the Company; provided, however, that the Investors shall bear the fees
         and out-of-pocket expenses of its legal counsel and accountants and
         agents selected by it.

         6.   INDEMNIFICATION. In the event any Registrable Securities are
         included in a Registration Statement under this Agreement:




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              (a)   To the extent permitted by law, the Company will indemnify
         and hold harmless each Investor who holds such Registrable Securities,
         the directors, if any, of such Investor, the officers, if any, of such
         Investor, each person, if any, who controls any Investor within the
         meaning of the Securities Act or the Exchange Act, and each broker,
         dealer or underwriter selling shares on behalf of the Investor, and the
         controlling persons thereof (each, an "Indemnified Person"), against
         any losses, claims, damages, expenses or liabilities (joint or several)
         (collectively "Claims") to which any of them become subject under the
         Securities Act, the Exchange Act or otherwise, insofar as such Claims
         (or actions or proceedings, whether commenced or threatened, in respect
         thereof) arise out of or are based upon any of the following
         statements, omissions or violations in the Registration Statement, or
         any post-effective amendment thereof, or any prospectus included
         therein: (i) any untrue statement or alleged untrue statement of a
         material fact contained in the Registration Statement or any
         post-effective amendment thereof or the omission or alleged omission to
         state therein a material fact required to be stated therein or
         necessary to make the statements therein not misleading, (ii) any
         untrue statement or alleged untrue statement of a material fact
         contained in any preliminary prospectus if used prior to the effective
         date of such Registration Statement, or contained in the final
         prospectus (as amended or supplemented, if the Company files any
         amendment thereof or supplement thereto with the SEC) or the omission
         or alleged omission to state therein any material fact necessary to
         make the statements made therein, in light of the circumstances under
         which the statements therein were made, not misleading or (iii) any
         violation or alleged violation by the Company of the Securities Act,
         the Exchange Act or any state securities law or any rule or regulation
         (the matters in the foregoing clauses (i) through (iii) being,
         collectively, "Violations"). Subject to the restrictions set forth in
         Section 6 (d) with respect to the number of legal counsel, the Company
         shall reimburse the Investors promptly as such expenses are incurred
         and are due and payable, for any legal fees or other reasonable
         expenses incurred by them in connection with investigating or defending
         any such Claim. Notwithstanding anything to the contrary contained
         herein, the indemnification agreement contained in this Section 6(a)
         (I) shall not apply to a Claim arising out of or based upon a Violation
         which occurs in reliance upon and in conformity with information
         furnished in writing to the Company by any Indemnified Person expressly
         for use in connection with the preparation of the Registration
         Statement or any such amendment thereof or supplement thereto, if such
         prospectus was timely made available by the Company pursuant to Section
         3(d) hereof; (II) with respect to any preliminary prospectus, shall not
         inure to the benefit of any such person from whom the person asserting
         any such Claim purchased the Registrable Securities that are the
         subject thereof (or to the benefit of any person controlling such
         person) if the untrue statement or omission of material fact contained
         in the preliminary prospectus was corrected in the prospectus, as then
         amended or supplemented, if such prospectus was timely made available
         by the Company



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         pursuant to Section 3(d) hereof; and (III) shall not apply to amounts
         paid in settlement of any Claim if such settlement is effected without
         the prior written consent of the Company, which consent shall not be
         unreasonably withheld. Such indemnity shall remain in full force and
         effect regardless of any investigation made by or on behalf of the
         Indemnified Persons and shall survive the transfer of the Registrable
         Securities by the Investors pursuant to Section 9.

              (b)   In connection with any Registration Statement in which an
         Investor is participating, each such Investor agrees to indemnify and
         hold harmless, to the same extent and in the same manner set forth in
         Section 6(a), the Company, each of its directors, each of its officers
         who signs the Registration Statement, each person, if any, who controls
         the Company within the meaning of the Securities Act or the Exchange
         Act, and any other stockholder selling securities pursuant to the
         Registration Statement or any of its directors or officers or any
         person who controls such stockholder within the meaning of the
         Securities Act or the Exchange Act (collectively and together with an
         Indemnified Person, an "Indemnified Party"), against any Claim to which
         any of them may become subject, under the Securities Act, the Exchange
         Act or otherwise, insofar as such Claim arises out of or is based upon
         any Violation, in each case to the extent (and only to the extent) that
         such Violation occurs in reliance upon and in conformity with written
         information furnished to the Company by such Investor expressly for use
         in connection with such Registration Statement; and such Investor will
         promptly reimburse any legal or other expenses reasonably incurred by
         them in connection with investigating or defending any such Claim;
         provided, however, that the indemnity agreement contained in this
         Section 6(b) shall not apply to amounts paid in settlement of any Claim
         if such settlement is effected without the prior written consent of
         such Investor, which consent shall not be unreasonably withheld;
         provided, further, however, that the Investor shall be liable under
         this Section 6(b) for only that amount of a Claim as does not exceed
         the net proceeds to such Investor as a result of the sale of
         Registrable Securities pursuant to such Registration Statement. Such
         indemnity shall remain in full force and effect regardless of any
         investigation made by or on behalf of such Indemnified Party and shall
         survive the transfer of the Registrable Securities by the Investors
         pursuant to Section 9. Notwithstanding anything to the contrary
         contained herein, the indemnification agreement contained in this
         Section 6(b) with respect to any preliminary prospectus shall not inure
         to the benefit of any Indemnified Party if the untrue statement or
         omission of material fact contained in the preliminary prospectus was
         corrected on a timely basis in the prospectus, as then amended or
         supplemented.

              (c)   The Company shall be entitled to receive indemnities from
         selling brokers, dealer managers and similar securities industry
         professionals participating in any distribution, to the same extent as
         provided above, with



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         respect to information such persons so furnished in writing by such
         persons expressly for inclusion in the Registration Statement.

              (d)   Promptly after receipt by an Indemnified Person or
         Indemnified Party under this Section 6 of notice of the commencement of
         any action (including any governmental action), such Indemnified Person
         or Indemnified Party shall, if a Claim in respect thereof is to made
         against any indemnifying party under this Section 6, deliver to the
         indemnifying party a written notice of the commencement thereof and
         this indemnifying party shall have the right to participate in, and, to
         the extent the indemnifying party so desires, jointly with any other
         indemnifying party similarly noticed, to assume control of the defense
         thereof with counsel mutually satisfactory to the indemnifying parties;
         provided, however, that an Indemnified Person or Indemnified Party
         shall have the right to retain its own counsel, with the fees and
         expenses to be paid by the indemnifying party, if, in the reasonable
         opinion of counsel retained by the indemnifying party, the
         representation by such counsel of the Indemnified Person or Indemnified
         Party and the indemnifying party would be inappropriate due to actual
         or potential differing interests between such Indemnified Person or
         Indemnified Party and other party represented by such counsel in such
         proceeding. The Company shall pay for only one separate legal counsel
         for the Investors; such legal counsel shall be selected by the
         Investors holding a majority in interest of the Registrable Securities.
         The failure to deliver written notice to the indemnifying party within
         a reasonable time of the commencement of any such action shall not
         relieve such indemnifying party of any liability to the Indemnified
         Person or Indemnified Party under this Section 6, except to the extent
         that the indemnifying party is prejudiced in its ability to defend such
         action. The indemnification required by this Section 6 shall be made by
         periodic payments of the amount thereof during the course of the
         investigation or defense, as such expense, loss, damage or liability is
         incurred and is due and payable.

              (e)   The obligations of the Company under this Section 6 shall be
         in addition to any liability which the Company may otherwise have to
         any Indemnified Person and the obligations of any Indemnified Person
         under this Section 6 shall be in addition to any liability which such
         Indemnified Person may otherwise have to the Company. The remedies
         provided in this Section 6 are not exclusive and shall not limit any
         rights or remedies which may otherwise be available to an indemnified
         party at law or in equity.

         7.   CONTRIBUTION. To the extent any indemnification provided for
         herein is prohibited or limited by law, the indemnifying party agrees
         to make the maximum contribution with respect to any amounts for which
         it would otherwise be liable under Section 6 in such proportion as is
         appropriate to reflect the relative fault of the Indemnifying Party and
         the Indemnified Party in connection with the




                                      -12-

<PAGE>   13



         statements or omissions which resulted in such losses, claims, damages
         or liabilities (or actions in respect thereof), as well as any other
         relevant equitable considerations- The relative fault of such
         Indemnifying Party and Indemnified Party shall be determined by
         reference to, among other things, whether the untrue or alleged untrue
         statement of a material fact or omission or alleged omission to state a
         material fact relates to information supplied by such Indemnified Party
         or by such Indemnified Party, and the parties, relative intent,
         knowledge, access to information and opportunity to correct or prevent
         such statement or omission. The parties hereto agree that it would not
         be just and equitable if contribution pursuant to this Section 7 were
         determined by pro rata allocation (even if the Investors or any
         underwriters were treated as one entity for such purpose) or by any
         other method of allocation which does not take account of the equitable
         considerations referred to in this Section 7. The amount paid or
         payable by an Indemnified Party as a result of the losses, claims,
         damages or liabilities (or actions in respect thereof) referred to
         above shall be deemed to include any legal or other fees or expenses
         reasonably incurred by such indemnified party in connection with
         investigating or defending any such action or claim; provided, however,
         that (a) no contribution shall be made under circumstances where the
         maker would not have been liable for indemnification under the fault
         standards set forth in Section 6, (b) no seller of Registrable
         Securities guilty of fraudulent misrepresentation (within the meaning
         of Section 11(f) of the Securities Act) shall be entitled to
         contribution from any seller of Registrable Securities who was not
         guilty of such fraudulent misrepresentation and (c) contribution by any
         seller of Registrable Securities shall be limited in amount to the net
         amount of proceeds received by such seller from the sale of such
         Registrable Securities.

         8.   REPORTS UNDER EXCHANGE ACT. With a view to making available to the
         Investors the benefits of Rule 144 or any other similar rule or
         regulation of the SEC that may at any time permit the Investors to sell
         securities of the Company to the public without registration, until
         such time as the Investors have sold all the Registrable Securities
         pursuant to a Registration Statement or Rule 144, the Company agrees
         to:

              (a)   make and keep public information available, as those terms
         are understood and defined in Rule 144;

              (b)   file with the SEC all reports and other documents required
         of the Company under the Securities Act and the Exchange Act; and

              (c)   furnish to each Investor so long as such Investor owns
         Registrable Securities, promptly upon request, (i) a written statement
         by the Company that it has complied with the reporting requirements of
         Rule 144, the Securities Act and the Exchange Act, (ii) a copy of the
         most recent annual or quarterly report of the



                                      -13-

<PAGE>   14



         Company and such other reports and documents so filed by the Company
         and (iii) such other information as may be reasonably requested to
         permit the Investors to sell such securities pursuant to Rule 144
         without registration.

         9.   ASSIGNMENT OF THE REGISTRATION RIGHTS. The rights to have the
         Company register Registrable Securities pursuant to this Agreement
         shall be automatically assigned by the Investors to transferees or
         assignees of all or any portion of such securities only if: (a) the
         Company is, within a reasonable time after such transfer or assignment,
         furnished with written notice of (i) the name and address of such
         transferee or assignee and (ii) the securities with respect to which
         such registration rights are being transferred or assigned, (b)
         immediately following such transfer or assignment the further
         disposition of such securities by the transferee or assignee is
         restricted under the Securities Act and applicable state securities
         laws, (c) at or before the time the Company received the written notice
         contemplated by clause (a) of this sentence the transferee or assignee
         agrees in writing with the Company to be bound by all of the provisions
         contained herein, and (d) such transfers of Registered Securities
         complies with the Subscription Agreement.

         10.  AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Agreement
         may be amended and the observance thereof may be waived (either
         generally or in a particular instance and either retroactively or
         prospectively), only with the written consent of the Company and
         Investors who hold a majority in interest of the Registrable
         Securities. Any amendment or waiver effected in accordance with this
         Section 10 shall be binding upon each Investor and the Company.

         11.  MISCELLANEOUS.

              (a)   A person or entity is deemed to be a holder of Registrable
         Securities whenever such person or entity owns of record such
         Registrable Securities. If the Company receives conflicting
         instructions, notices or elections from two or more persons or entities
         with respect to the same Registrable Securities, the Company shall act
         upon the basis of instructions, notice or election received from the
         registered owner of such Registrable Securities.

              (b)   Notices required or permitted to be given hereunder shall be
         in writing and shall be deemed to be sufficiently given when personally
         delivered or when sent by registered mail, return receipt requested,
         addressed (i) if to the Company, at Innovative Gaming Corporation of
         America, 4725 Aircenter Circle, Reno, Nevada, 89502, Attention: Chief
         Financial Officer (ii) if to the Initial Investor, at the address set
         forth under its name in the Subscription Agreement and (iii) if to any
         other Investor, at such address as such Investor shall have provided in
         writing to the Company, or at such other address as each such party
         furnishes by notice given in accordance with this Section 11(b), and
         shall be effective, when



                                      -14-

<PAGE>   15



         personally delivered, upon receipt, and when so sent by certified mail,
         four business days after deposit with the United States Postal Service.

              (c)   Failure of any party to exercise any right or remedy under
         this Agreement or otherwise, or delay by a party in exercising such
         right or remedy, shall not operate as a waiver thereof.

              (d)   This Agreement shall be enforced, governed by and construed
         in accordance with the laws of the State of Minnesota applicable to the
         agreements made and to be performed entirely within such state, without
         giving effect to rules governing the conflict of laws. In the event
         that any provision of this Agreement is invalid or unenforceable under
         any applicable statute or rule of law, then such provision shall be
         deemed inoperative to the extent that it may conflict therewith and
         shall be deemed modified to conform with such statute or rule of law.
         Any provision hereof which may prove invalid or unenforceable under any
         law shall not affect the validity or enforceability of any other
         provision hereof.

              (e)   This Agreement constitutes the entire agreement among the
         parties hereto with respect to the subject matter hereof. There are no
         restrictions, promises, warranties or undertakings, other than those
         set forth or referred to herein. This Agreement supersedes all prior
         agreements and understandings among the parties hereto with respect to
         the subject matter hereof.


              (f)   Subject to the requirements of Section 9 hereof, this
         Agreement shall inure to the benefit of and be binding upon the
         successors and assigns of each of the parties hereto.

              (g)   All pronouns and any variations thereof refer to the
         masculine, feminine or neuter, singular or plural, as the context may
         require .

              (h)   The headings in the Agreement are for convenience of
         reference only and shall not limit or otherwise affect the meaning
         hereof.

              (i)   The Company shall not enter into any agreement with respect
         to its securities that is inconsistent with the rights granted to the
         holders of Registrable Securities in this Agreement or otherwise
         conflicts with the provisions hereof. Without limiting the generality
         of the foregoing, without the written consent of the Holders of a
         majority in interest of the Registrable Securities, the Company shall
         not grant to any person the right to request it to register any of its
         securities under the Securities Act unless the rights so granted are
         subject in all respect to the prior rights of the holders of
         Registrable Securities set forth herein, and are not otherwise in
         conflict or inconsistent with the provisions of this Agreement.



                                      -15-

<PAGE>   16


              (j)   This Agreement may be executed in two or more counterparts,
         each of which shall be deemed an original but all of which shall
         constitute one and the same agreement. This Agreement, once executed by
         a party, may be delivered to the other party hereto by telephone line
         facsimile transmission of a copy of this Agreement bearing the
         signature of the party so delivering this Agreement.

              IN WITNESS WHEREOF, the parties have caused this Agreement to be
         duly executed by their respective officers thereunto duly authorized as
         of day and year first above written.

                          INNOVATIVE GAMING CORPORATION
                                    OF AMERICA

                          By:  s/ Edward G. Stevenson
                             --------------------------------------------------
                                  Edward G. Stevenson, Chairman and CEO



                          INVESTOR:

                          THE SHAAR FUND, LTD.

                          By:     Samuel Levinson
                             ---------------------------------------------------
                          Its:
                              --------------------------------------------------

         Address for Notices:

         The Shaar Fund, Ltd.
         c/o Levinson Capital Management
         Two World Trade Center, Suite 1820
         New York, NY 10048
         Attention: Samuel Levinson
         Telephone No.: (212) 432-7711
         Facsimile No.: (212) 432-7771






                                      -16-